Author
Listed:
- Md. Sariful Islam
- Mohammed Ziaul Haider
Abstract
Purpose - The purpose of this paper is to investigate the relationship between poverty and technical efficiency (TE) of paddy farmers in presence of their heterogeneous selling behaviours. This paper explains how such behavioural heterogeneity affects this relationship in south-western Bangladesh. Design/methodology/approach - Translog production frontier model was used to estimate TE since it fitted the data set better. On the other hand, poverty indices were constructed by using P-αmethod. Then, multinomial logit models examined the existence of heterogeneous selling behaviours. It revealed adequate evidences in favour of behavioural heterogeneity. Finally, the authors employed a series of two stage instrumental variable regression models to relate poverty and TE with and without considering the behavioural heterogeneity. Findings - The study finds that around 18, 39 and 44 per cent of households exhibit autarkic, non-wholesaling and wholesaling behaviour, respectively. Market failure due to transaction cost and credit constraints leads to emergence of such heterogeneity. Across these heterogeneous behaviours, impact of improving TE on poverty status significantly differs. Without controlling behavioural heterogeneity, TE significantly improves the poverty status of the rural farm households. However, scenario is changed after controlling this heterogeneity. After behavioural segregations, TE improves poverty status only for wholesalers. In contrary to prior expectation, it worsens the poverty situation for both autarkic and non-wholesaling households. Simultaneous failure in both credit and product market for these households might be the plausible reason behind this heterodox finding. Credit market failure compels these households to borrow from local money lenders with costlier terms. This effort might improve their TE. But, product market failure makes their additional production due to improved TE unsold. Thus, repayment of credit directly reduces their consumption expenditure. Therefore, an effort to improve TE might increase prevalence and depth of poverty when market failure exists. Henceforth, the improvement of TE appears as an effective policy instrument only when households exhibit wholesaling behaviour. Originality/value - The earlier studies show the relationship between TE and poverty status but did not account behavioural heterogeneity. The authors attempt to overcome this shortcoming and show how market failure induced behavioural heterogeneity affects the effectiveness of TE on improving poverty status of farm households.
Suggested Citation
Md. Sariful Islam & Mohammed Ziaul Haider, 2018.
"Poverty and technical efficiency in presence of heterogeneity in household behaviours,"
International Journal of Social Economics, Emerald Group Publishing Limited, vol. 45(11), pages 1490-1514, August.
Handle:
RePEc:eme:ijsepp:ijse-04-2017-0171
DOI: 10.1108/IJSE-04-2017-0171
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Citations
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Cited by:
- Md.Salamun Rashidin & Sara Javed & Bin Liu & Wang Jian, 2020.
"Ramifications of Households’ Nonfarm Income on Agricultural Productivity: Evidence From a Rural Area of Pakistan,"
SAGE Open, , vol. 10(1), pages 21582440209, January.
- Obayelu, Oluwakemi & Obayelu, Abiodun & Awoku, Ifeoluwase, 2021.
"Technical efficiency and socioeconomic effects on poverty dynamics among cassava-based farming households in rural Nigeria,"
2021 Conference, August 17-31, 2021, Virtual
315376, International Association of Agricultural Economists.
More about this item
Keywords
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JEL classification:
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
- I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
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